CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 3, 2001
Gentner Communications Corporation
----------------------------------- -----------------------------------
(Exact Name of Registrant as Specified in its Charter)
UTAH 17219 87-0398877
- ---------------------------- ---------------------- --------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
1825 Research Way, Salt Lake City, Utah 84119
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(801) 975-7200
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
INFORMATION TO BE INCLUDED IN REPORT
Item 2. Acquisition or Disposition of Assets.
As previously reported in a Current Report on Form 8-K filed on October 18,
2001(the "Original Filing"), Gentner Communications Corporation on October 3,
2001 caused its wholly owned subsidiary, Gentner Ventures, Inc., to purchase all
of the issued and outstanding shares of Ivron Systems, Ltd., of Dublin, Ireland.
The terms and conditions of the purchase are more fully described in the
Original Filing.
We are amending the Original Filing to present revised Financial Statements
of the business acquired, as set forth in Item 7(a) of Form 8-K.
Item 7. Financial Statements.
(a) Financial Statements of Business Acquired. Audited financial statements of
Ivron Systems, Ltd. for fiscal years ended December 31, 1998, 1999, and
2000 and the unaudited condensed consolidated interim financial information
of Ivron Systems, Ltd. for the nine month periods ended September 30, 2000
and 2001.
Auditors' report F-1
Accounting policies F-2
Consolidated profit and loss accounts F-4
Consolidated balance sheets F-5
Consolidated cash flow statements F-6
Reconciliation of net cash flow to movement in net funds F-6
Notes forming part of the consolidated financial statements F-7
Consolidated profit and loss accounts F-24
Consolidated balance sheets F-25
Consolidated cash flow statements F-26
Notes to the unaudited consolidated financial statements F-27
(b) Pro Form Information
Unaudited pro forma information of Gentner Communications
Corporation and Ivron Systems, Ltd as of and for the period
from July 1, 2001 to September 30, 2001. The unaudited pro
forma information as of and for the fiscal year ended June 30,
2001 of Gentner Communications Corporation and Ivron
Systems, Ltd., was included in the Original Filing PF-1
Pro Forma Condensed Combined Financial Information (unaudited) PF-2
Pro Forma Condensed Combined Balance Sheet as of September 30,
2001 (unaudited PF-3
Pro Forma Condensed Combined Statement of Operations for the
Three Months Ended September 30, 2001 (unaudited) PF-4
Notes to Pro Forma Condensed Consolidated Financial Information
(unaudited) PF-5
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Gentner Communications Corporation
(the Registrant)
By: Randall J. Wichinski
--------------------------------------
Randall J. Wichinski
Vice President Chief Financial Officer
(Duly authorized Officer and Principal
Financial and Accounting Officer)
Dated: November 23, 2001
2
(a) Ivron Systems, Ltd., Audited Financial Statements for fiscal years ended
December 31, 1998, 1999, and 2000.
Auditors' report to the Directors and Stockholders of Ivron Systems Limited
We have audited the accompanying consolidated balance sheets of Ivron Systems
Limited and its subsidiary at 31 December 2000 and 1999 and the related
consolidated profit and loss accounts and statements of consolidated cash flows
for the years ended 31 December 2000, 1999 and 1998, all expressed in US
Dollars. The financial statements are the responsibility of the directors of
Ivron Systems Limited. Our responsibility is to express an opinion on those
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying consolidated financial statements have been prepared assuming
that Ivron Systems Limited and its subsidiary will continue as a going concern.
As discussed in note 1 to the consolidated financial statements, Ivron Systems
Limited and its subsidiary have suffered recurring negative cash flows and
losses from operations since inception. As also discussed in note 1, Ivron
Systems Limited and its subsidiary require additional funding to fund future
operations. These issues raise substantial doubts about the ability of Ivron
Systems Limited and its subsidiary to continue as a going concern. The directors
plan in regard to these matters are also described in note 1. The consolidated
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ivron Systems Limited and its
subsidiary as of 31 December 2000 and 1999, results of operations and cash flows
for each of the years ended 31 December 2000, 1999 and 1998 in conformity with
accounting principles generally accepted in the Republic of Ireland.
Generally accepted accounting principles in Ireland vary in certain respects
from generally accepted accounting principles in the United States. Application
of generally accepted accounting principles in the United States would have
affected results of operations and shareholders' equity as of and for the years
ended 3l December 1999 and 3l December 2000 for Ivron Systems Limited to the
extent summarized in note 26 to the consolidated financial statements.
KPMG
Chartered Accountants
Dublin, Ireland
27 July 2001
F-1
Ivron Systems Limited
Ivron Systems Limited and its subsidiary (the group) has operations in Ireland
and the United States. Ivron Systems Limited operates in Ireland and Ivron
Systems Inc operates in the United States.
ARTICLE 1 -- Accounting policies
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the consolidated financial
statements of Ivron Systems Limited and its subsidiary.
Basis of preparation
The consolidated financial statements are presented in United States dollars
(US$) and prepared in accordance with Irish generally accepted accounting
principles (GAAP) under the historical cost convention and comply with financial
reporting standards of the Accounting Standards Board. Significant differences
between Irish GAAP and US GAAP are described in note 26.
Basis of consolidation
The consolidated financial statements include the audited financial statements
of the company and its subsidiary. All significant intercompany profits,
transactions and account balances have been eliminated on consolidation.
Turnover
Turnover represents the invoiced value of goods and services exclusive of Value
Added Tax. Revenue is recognised at the point at which title passes.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less accumulated depreciation.
The charge for depreciation is calculated to write down the cost of tangible
fixed assets over their expected useful lives on a straight-line basis at the
following annual rate:
Equipment 33 1/3%
Stocks
Stocks are valued at the lower of cost and net realisable value on an actual
cost basis.
Cost includes all expenditure which has been incurred in the normal course of
business in bringing the products to their present location and condition. In
the case of finished goods, cost is defined as the aggregate cost of raw
materials, direct labour and the attributable proportion of direct production
overheads.
Net realisable value is the actual or estimated selling price net of trade
discounts less all further costs to completion and all costs likely to be
incurred in the realisation of such selling price.
F-2
Ivron Systems Limited
Statement of accounting policies (continued)
Taxation
Corporation tax is provided on profits should they arise.
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these differences are expected to be recovered or
settled.
Foreign currencies
Transactions arising in foreign currencies are recorded at the monthly average
exchange rates. Monetary items denominated in foreign currencies are translated
at the balance sheet rate and the exchange differences are dealt with in the
profit and loss account.
The functional currency of Ivron Systems Limited and its US subsidiary is the US
dollar. Transactions during the period in currencies other than the functional
currency, for each of the entities, have been translated at the rate of exchange
prevailing at the date of the transaction. The resulting monetary assets and
liabilities denominated in currencies other than the functional currency are
translated at the balance sheet rate and the exchange differences are dealt with
in the profit and loss account.
Leased assets
Tangible fixed assets acquired under finance leases are included in the balance
sheet at their fair value and depreciated over the shorter of the lease term and
their useful lives. The corresponding liabilities are recorded as a creditor and
the interest element of the finance lease rentals is charged to the profit and
loss account during the lease term to reflect a constant rate of interest on the
remaining balance of the obligation for each accounting period.
Operating lease rentals are charged to the profit and loss account on a straight
line basis over the lease term.
Research and development
Expenditure on research and development of new products is written off fully in
the year in which it is incurred.
Intangible fixed assets
Intangible fixed assets relate to software licenses and are being written off to
the profit and loss account over three years.
Goodwill
Purchased goodwill arising on the acquisition of a business represents the
excess of the acquisition cost over the fair value of the identifiable net
assets when they were acquired. Purchased goodwill arising on the acquisition of
a business is capitalised in the balance sheet and amortised over the estimated
economic life of 10 years.
F-3
Ivron Systems Limited
Consolidated profit and loss accounts
For the years ended 31 December
Notes 2000 1999 1998
US$ US$ US$
(in thousands)
Turnover -continuing operations 1,443 1,626 2,843
Cost of sales (1,363) (1,139) (1,823)
------- ------- -------
Gross profit - continuing operations 80 487 1,020
Operating expenses 2 (2,385) (2,282) (2,635)
------- ------- -------
Operating loss - continuing operations (2,305) (1,795) (1,615)
Interest receivable and similar income 3 3 1 7
Interest payable 4 (6) (8) (6)
------- ------- -------
Loss on ordinary activities before
taxation (2,308) (1,802) (1,614)
Tax on loss on ordinary activities 8 - - -
------- ------- -------
Retained loss for the financial year (2,308) (1,802) (1,614)
======= ======= =======
There were no recognised gains or losses in the financial period other than
those dealt with in the profit and loss account and accordingly neither
consolidated movements on the profit and loss accounts nor a statement of total
recognised gains and losses has been prepared.
The accompanying notes and accounting policies are an integral part of these
financial statements.
F-4
Ivron Systems Limited
Consolidated balance sheets
at 31 December
Note 2000 1999
US$ US$
(in thousands)
Fixed assets
Tangible assets 9 95 191
Intangible assets 10 52 62
Purchased goodwill 11 1,050 1,200
----- -----
1,197 1,453
Current assets
Stocks 13 440 172
Debtors 14 478 503
Cash at bank and in hand 987 83
----- -----
1,905 758
Creditors: amounts falling due
within one year 15 (685) (841)
----- -----
Net current assets/(liabilities) 1,220 (83)
----- -----
Total assets less current liabilities 2,417 1,370
Creditors: amounts falling due
after one year 16 (725) (767)
----- -----
Net assets 1,692 603
===== =====
Capital and reserves
Called up share capital 18 3,752 2,054
Share premium account 19 3,664 1,965
Profit and loss account 19 (5,724) (3,416)
----- -----
Shareholders' funds - equity 20 1,692 603
===== =====
The accompanying notes and accounting policies are an integral part of these
financial statements.
F-5
Ivron Systems Limited
Consolidated cash flow statements
for the years ended 31 December
Note 2000 1999 1998
US$ US$ US$
(in thousands)
Cash outflow from operating activities 23 (2,404) (1,300) (1,188)
Returns on investments and servicing of finance 24 (3) (7) 1
Capital expenditure and financial investment 24 (58) (77) (158)
Acquisitions and disposals 24 - - (1,893)
Management of liquid resources - - -
Financing activities 24 3,369 1,213 3,493
----- ----- -----
Increase/(decrease) in cash in the year 904 (171) 255
===== ===== =====
Reconciliation of net cash flow to movement in net funds
for the years ended 31 December
Note 2000 1999 1998
US$ US$ US$
(in thousands)
Increase/(decrease) in cash for the year 904 (171) 255
Cash outflow/(inflow) from decrease/(increase)
in debt and lease financing 27 63 (868)
----- ----- -----
Movement in net funds/(debt) in the year 931 (108) (613)
Net debt at beginning of year (721) (613) -
----- ----- -----
Net funds/(debt) at end of year 25 210 (721) (613)
----- ----- -----
The accompanying notes and accounting policies are an integral part of these
financial statements.
F-6
Ivron Systems Limited
Notes
forming part of the financial statements
1 Financial support
These consolidated financial statements have been prepared on a going
concern basis which contemplates the continuation and expansion of trading
activities as well as the realisation of assets and liquidation of
liabilities in the ordinary course of business. Ivron Systems Limited has
generated negative cash flows and losses from operating activities.
The company has generated losses of US$5.7 million since incorporation and
the losses have been financed principally by shareholders' equity. The
directors have prepared a business plan incorporating cash flow projections
for the period through to 30 June 2002. The company's business plan
envisages that additional finance will be required to fund the company's
activities and certain directors and shareholders have indicated that they
are willing to provide the necessary financial support for the foreseeable
future to enable the company to trade at it's projected level of operation.
Accordingly, the directors consider it appropriate to prepare the financial
statements on a going concern basis.
2 Operating expenses Year ended 3l December
2000 1999 1998
US$ US$ US$
(in thousands)
Selling, general and administration expenses 1,602 1,165 1,419
Research and development expenses 783 1,117 1,216
----- ----- -----
2,385 2,282 2,635
===== ===== =====
3 Interest receivable and similar income Year ended 3l December
2000 1999 1998
US$ US$ US$
(in thousands)
Deposit interest received 3 1 7
===== ===== =====
F-7
Ivron Systems Limited
Notes (continued)
4 Interest payable Year ended 3l December
2000 1999 1998
US$ US$ US$
(in thousands)
Bank interest 2 3 4
Finance lease interest payable
in respect of finance leases 4 5 2
----- ----- -----
6 8 6
===== ===== =====
5 Statutory information Year ended 31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Auditors' remuneration 16 13 13
===== ===== =====
6 Employees
The average weekly number of employees, analysed by category, were as
follows:
Year ended 31 December
2000 1999 1998
Number Number Number
(in thousands)
Sales and administration 5 3 3
Research and development 10 18 18
Manufacturing 5 3 5
----- ----- -----
20 24 26
===== ===== =====
F-8
Ivron Systems Limited
Notes (continued)
6 Employees (continued)
The aggregate payroll costs of these employees were as follows:
Year ended 31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Wages and salaries 1,088 1,135 1,402
Social welfare costs 102 117 163
Pension cost 5 - -
----- ----- -----
1,195 1,252 1,565
===== ===== =====
7 Directors' remuneration and transactions
Year ended 31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Directors' remuneration
Fees - - 27
Other remuneration including pension contributions 200 - -
----- ----- -----
200 - 27
===== ===== =====
Details of directors' interests in shares are provided in the directors'
report.
8 Tax on loss on ordinary activities
No corporation tax was payable on the loss on ordinary activities for the
year.
F-9
Ivron Systems Limited
Notes (continued)
9 Tangible fixed assets
Equipment
US$
(in thousands)
Cost
At 1 January 2000 378
Additions 36
----
At 31 December 2000 414
----
Depreciation
At 1 January 2000 187
Depreciation 132
----
At 31 December 2000 319
====
Net book value
At 31 December 2000 95
====
At 31 December 1999 191
====
F-10
Ivron Systems Limited
Notes (continued)
10 Intangible fixed assets Licences
US$
(in thousands)
Cost
At beginning of year 96
Additions in year 22
----
At end of year 118
====
Amortisation
At beginning of year 34
Amortised during the year 32
----
At end of year 66
====
Net book value
At 31 December 2000 52
====
At 31 December 1999 62
====
11 Goodwill Purchased
goodwill
US$
(in thousands)
Cost
At beginning of year 1,500
Additions in year -
-----
At end of year 1,500
=====
Amortisation
At beginning of year 300
Amortised during the year 150
-----
At end of year 450
=====
Net book value
At 31 December 2000 1,050
=====
At 31 December 1999 1,200
=====
The goodwill relates to the acquisition of the Mentec Picturecom business
on 6 March 1998.
F-11
Ivron Systems Limited
Notes (continued)
12 Financial assets
Shares in subsidiary at cost
On 29 August 2000, Ivron Systems Limited established a wholly owned
subsidiary (1 ordinary share at US$1 each) of Ivron Systems Inc, a company
incorporated in the United States. The activity of this company is similar
in nature to that of Ivron Systems Limited. The registered office of Ivron
Systems Inc is located at 110 Wild Basin Road, Suite 270, Austin TX 78746,
USA.
13 Stocks 31 December
2000 1999
US$ US$
(in thousands)
Raw materials 329 124
Finished goods 111 48
--- --
440 172
=== ===
14 Debtors: amounts falling due within one year
31 December
2000 1999
US$ US$
(in thousands)
Trade debtors 326 369
Prepayments and accrued income 20 16
Other debtors 132 118
--- ---
478 503
=== ===
F-12
Ivron Systems Limited
Notes (continued)
15 Creditors: amounts falling due within one year
31 December
2000 1999
US$ US$
(in thousands)
Trade creditors 61 470
Obligations under finance leases (note 17) 52 37
Accruals and deferred income 500 278
PAYE/PRSI 72 56
--- ---
Total 685 841
=== ===
16 Creditors: amounts falling due after one year
31 December
2000 1999
US$ US$
(in thousands)
Loan (note 17) 725 725
Obligations under finance lease (note 17) - 42
--- ---
725 767
=== ===
17 Details of borrowings
Between Between
Within one and two two and five
one year years years Total
US$ US$ US$ US$
2000
(in thousands)
Repayable by instalments
Obligations under finance leases 52 - - 52
Loan from Mentec Limited - 725 - 725
--- --- --- ---
At 3l December 2000 52 725 - 777
=== === === ===
F-13
Ivron Systems Limited
Notes (continued)
18 Called up share capital
2000 1999 1998
US$ US$ US$
(in thousands)
Equity
Authorised:
150,000 "A" Ordinary Shares of US$1 each 150 150 150
4,850,000 Ordinary Shares of US$1 each 4,850 4,850 4,850
----- ----- -----
5,000 5,000 5,000
===== ===== =====
Allotted, called up and fully paid:
Opening share capital 2,054 1,416 -
Shares issued during the period:
Ordinary Shares of US$1 each 1,698 638 1,416
----- ----- -----
Closing share capital 3,752 2,054 1,416
===== ===== =====
On 27 February 1998, a special resolution was passed to convert the
authorised share capital from IR(pound)100 to US$5,000,000 by the creation
of 150,000 "A" ordinary shares of US$1 each and 4,850,000 ordinary shares
of US$1 each.
At 3l December 2000 the company had granted 290,000 options over ordinary
shares at an exercise price of US$2 per share, the market price of the
company's shares on the date the options were granted, accordingly no
compensation cost has been recognised.
F-14
Ivron Systems Limited
Notes (continued)
19 Reserves
Share Share Profit and
capital premium loss
account account account Total
US$ US$ US$ US$
(in thousands)
Opening balance - - - -
Movement during the year 1,416 1,327 (1,614) 1,129
----- ----- ------ -----
At 31 December 1998 1,416 1,327 (1,614) 1,129
Movement during the year 638 638 (1,802) (526)
----- ----- ------ -----
At 31 December 1999 2,054 1,965 (3,416) 603
Movement during the year 1,698 1,699 (2,308) 1,089
----- ----- ------ -----
At 31 December 2000 3,752 3,664 (5,724) 1,692
===== ===== ====== =====
20 Reconciliation of movement in shareholders' funds
31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Shareholders' funds at beginning of year 603 1,129 -
Shares issued during year 3,397 1,276 2,743
Loss for financial year (2,308) (1,802) (1,614)
------ ------ ------
Shareholders' funds at end of year 1,692 603 1,129
====== ====== ======
F-15
Ivron Systems Limited
Notes (continued)
21 Commitments
2000 1999 1998
US$ US$ US$
(in thousands)
Capital commitments
Authorised and contracted for - - -
Authorised and not contracted for - - -
----- ----- -----
- - -
===== ===== =====
Operating lease commitments
Annual commitments cost under non cancellable operating leases as follows:
Land and 2000 1999 1998
Buildings Total Total Total
IR(pound) IR(pound) IR(pound) IR(pound)
(in thousands)
Expiring
Within one year 52 52 61 -
Between two and five years - - - 61
More than five years - - - -
---- ---- ---- ----
52 52 61 61
==== ==== ==== ====
F-16
Ivron Systems Limited
Notes (continued)
22 Related party transactions
Mentec Limited is a shareholder of Ivron Systems Limited.
The company's material related parties as defined by FRS 8 - Related Party
Disclosures and the extent of transactions are summarised below:
2000 1999 1998
Mentec Mentec Mentec
Limited Limited Limited
US$ US$ US$
(in thousands)
Cost of goods/services supplied
to Ivron Systems Limited on
normal trading terms 57 7 476
=== === ===
Amounts due from/(to) related parties at arising from:
Trading activities (40) (7) (12)
=== === ===
Maximum amount outstanding
during the year 40 7 427
=== === ===
Mentec Limited provided an interest bearing loan to Ivron Systems Limited
for US$750,000. The terms of the loan required repayment of US$375,000 on
31 March 2000 and 30 September 2000. The interest on the loan is DIBOR plus
3.5% for 3 months funds from the repayment dates. This loan will be repaid
to Mentec Limited at a date which is yet to be determined.
Dr. M. Pierce, a director of the company, is a shareholder and director of
Mentec Limited and Mr. M. Horgan is also a director of Mentec Limited. Mr.
J. Tracey, a director of the company, is a director of Trinity Venture
Capital, a company having a shareholding in Ivron Systems Limited.
F-17
Ivron Systems Limited
Notes (continued)
23 Reconciliation of operating profit to net cash inflow from operating
activities
Year ended 31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Operating profit (2,305) (1,795) (1,615)
Depreciation charges 132 130 57
Goodwill amortised 150 150 150
Intangible fixed assets amortised 32 27 7
(Increase)/decrease in stock (268) (86) 186
Decrease/(increase) in debtors 26 35 (538)
(Decrease)/increase in creditors (171) 239 565
---- --- ---
Cash outflow from operating activities (2,404) (1,300) (1,188)
====== ====== ======
24 Gross cash flows Year ended 31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Returns on investments and servicing of finance
Interest received 3 1 7
Interest paid (6) (8) (6)
---- --- ---
Net cash (outflow)/inflow from returns on
investments and servicing of finance (3) (7) 1
==== === ===
F-18
Ivron Systems Limited
Notes (continued)
24 Gross cash flows (continued) Year ended 31 December
2000 1999 1998
US$ US$ US$
(in thousands)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (36) (19) (120)
Payments to acquire intangible fixed assets (22) (58) (38)
--- --- ---
Net cash outflow from investing activities (58) (77) (158)
=== === ====
Acquisitions and disposals
Acquisition of Mentec Picturecom
Limited - - (1,893)
=== === ====
Financing
Capital element of finance lease rentals (27) (38) -
Shares issued for cash 3,396 1,276 2,743
Mentec loan drawdown - - 750
Repayment of Mentec loan - (25) -
----- ----- -----
Net cash inflow from financing 3,369 1,213 3,493
===== ===== =====
F-19
Ivron Systems Limited
Notes (continued)
25 Analysis of changes in net funds
At At
31 December Cash 31 December
1999 flow 2000
US$ US$ US$
(in thousands)
Cash at bank and in hand 83 904 987
Long term loan (725) - (725)
Finance leases (79) 27 (52)
------ ------
Total (721) 210
====== ======
26 Reconciliation between Irish and U.S. Accounting Principles
The consolidated financial statements of Ivron Systems Limited have been
prepared in accordance with generally accepted accounting principles
applicable in Ireland ("Irish GAAP") which differ in certain significant
respects from those applicable in the U.S. (" U.S. GAAP"). There are no
material differences between net loss and shareholders' equity as reported
under Irish and US GAAP as they apply to the financial statements of the
company.
(a) Financial statement format
The format of the financial statements and certain note disclosures under
U.S. GAAP differ from those under Irish GAAP. The company has not presented
the disclosure under US GAAP in these financial statements.
(b) Forward - looking statements
To the extent any statement made in these financial statements with
information that is not historical, these statements are necessarily
forward - looking. As such, they are subject to the occurrence of many
events outside of Ivron's control and are subject to various risk factors
that would cause our results to differ materially from those expressed in
any forward - looking statement.
F-20
Ivron Systems Limited
26 Reconciliation between Irish and U.S. Accounting Principles (continued)
(c) Cash flows
In accordance with UK and Irish GAAP, the group complies with Financial
Reporting Standard No. 1 - "Cash flow statements" (FRS 1). Its objective
and principles are similar to those set out in SFAS No. 95 "Statement of
Cash Flows". The principal difference between the standards is in respect
of classification. Under FRS 1, the group presents its cash flows for (a)
operating activities; (b) returns on investments and servicing of finance;
(c) taxation; (d) capital expenditure; (e) acquisitions and disposals; and
(f) financing activities. SFAS No. 95 requires only three categories of
cash flow activity (a) operating; (b) investing; and (c) financing.
Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 are included as operating activities under SFAS No.
95. In addition, under FRS 1, cash and liquid resources include short term
borrowings repayable on demand. SFAS No. 95 requires movements in such
borrowings to be included in financing activities.
(d) New Accounting Pronouncements
In 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). This is effective for
the Company's financial statements beginning 1 January, 2001. SFAS No. 133
requires a Company to recognise all derivative instruments as assets or
liabilities in its balance sheet and measure them at fair value. The
Company does not expect that the adoption of this statement will have any
material effect on the Company's financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" (SAB 101). SAB 101 provides guidance
on revenue recognition and related disclosures in financial statements. The
SEC issued guidance on October 12, 2000 with respect to the interpretation
of SAB 101. The adoption of SAB 101 did not have any material effect on the
Company's financial statements.
In July 2001, the FASB issued Statement Number 141, Business Combinations,
and Statement No. 142, Goodwill and Other Intangible Assets. Statement 142
will require that goodwill and intangible assets with indefinite useful
lives will no longer be amortised, but instead tested for impairment, at
least annually, in accordance with the provisions of Statement 142. The
company is required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective January 1, 2002.
Statement 141 will require upon adoption of Statement 142, that the company
evaluate its existing intangible assets and goodwill that were acquired in
a prior purchase business combination, and to make any necessary
reclassifications in order to conform with the new criteria in Statement
141 for recognition apart from goodwill. Upon adoption of Statement 142,
the company will be required to reassess the useful lives and residual
values of all intangible assets acquired in purchase business combinations,
and make any necessary amortisation period adjustments by the end of the
first interim period after adoption.
F-21
Ivron Systems Limited
26 Reconciliation between Irish and U.S. Accounting Principles (continued)
Because of the extensive effort needed to comply with adopting Statements
141 and 142, it is not practicable to reasonably estimate the impact of
adopting the standards on the company's financial statements at the date of
this report, including whether any transitional impairment losses will be
required to be recognised as the cumulative effect of the change in
accounting principle.
In June 2001, the FASB issued Statement 143, Accounting for Asset
Retirement Obligations. This standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. The company does not expect that the adoption of this
standard will have any material effect on the company's financial
statements.
In August 2001, the FASB issued Statement 144, Accounting for the
Impairment or Disposal of Longlife Assets. The company is required to adopt
Statement 144 no later than the year beginning after December 15, 2001. The
company does not expect that the adoption of Statement 144 will have a
material impact on the company's financial statements because the
impairment assessment under Statement 144 is largely unchanged from
Statement 121.
F-22
Unaudited Condensed Consolidated Interim Financial Information of Ivron Systems,
Ltd., for the nine month periods ended September 30, 2000 and 2001.
Ivron Systems Limited
Consolidated profit and loss accounts (Unaudited)
Nine month Nine month
period ended period ended
30 September 30 September
2001 2000
US$ US$
(in thousands)
Turnover -continuing operations 152 1,186
Cost of sales (531) (997)
------ ------
Gross (loss)/profit - continuing operations (379) 189
Operating expenses (2,604) (1,682)
------ ------
Operating loss - continuing operations (2,983) (1,493)
Interest receivable and similar income 2 2
Interest payable (128) (3)
------ ------
Loss on ordinary activities before
taxation (3,109) (1,494)
Tax on loss on ordinary activities - -
------ ------
Retained loss for the financial year (3,109) (1,494)
====== ======
F-23
Ivron Systems Limited
Consolidated balance sheets
30 September 31 December
2001 2000
(Unaudited)
US$ US$
(in thousands)
Fixed assets
Tangible assets 21 95
Intangible assets 2 52
Purchased goodwill 937 1,050
------ ------
960 1,197
Current assets
Stocks 651 440
Debtors 132 478
Cash at bank and in hand 460 987
------ ------
1,243 1,905
Creditors: amounts falling due
within one year (391) (685)
------ ------
Net current assets 852 1,220
------ ------
Total assets less current liabilities 1,812 2,417
Creditors: amounts falling due
after one year - (725)
------ ------
Net assets 1,812 1,692
------ ------
Capital and reserves
Called up share capital 5,367 3,752
Share premium account 5,278 3,664
Profit and loss account (8,833) (5,724)
------ ------
Shareholders' funds - equity 1,812 1,692
====== ======
F-24
Ivron Systems Limited
Consolidated cash flow statements (unaudited)
Nine month Nine month
period ended period ended
30 September 30 September
2001 2000
US$ US$
(in thousands)
Cash outflow from operating activities (2,869) (1,922)
Returns on investments and servicing of finance (126) (1)
Capital expenditure and financial investment 8 (34)
Acquisitions and disposals - -
Management of liquid resources - -
Financing activities 2,460 2,437
----- -----
Increase/(decrease) in cash in the period (527) 480
===== =====
F-25
Ivron Systems Limited
Notes to the unaudited consolidated financial statements
1. Basis of Preparation
The unaudited consolidated financial statements included herein have been
prepared by Ivron Systems Limited without audit. Certain information and
footnote disclosures normally included in the financial statements prepared
in accordance with US GAAP have been omitted. These unaudited financial
statements should be read in conjunction with the 2000 audited financial
statements and notes thereto.
In the opinion of the company's management, the accompanying unaudited
consolidated financial statements have been prepared on a basis
substantially consistent with the audited financial statements and contain
adjustments, all of which are of a normal recurring nature, necessary to
present fairly its financial position as of September 30, 2001 and its
results of operations and cash flows for the 9 months ended September 30,
2001 and 2001. Interim results are not necessarily indicative of results
for the fiscal year.
2. Differences between US and Irish Accounting Principles
The financial statements presented herein have been prepared in accordance
with Irish GAAP. Such principles vary in certain respect from US GAAP.
There are no material differences between net loss and shareholders equity
as reported under Irish and US GAAP as they apply to the unaudited
financial statements presented herein.
F-26
Pro Forma Financial Information
Gentner Communications Corporation and Ivron Systems, Ltd.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial information gives
effect to the share purchase transaction of Ivron Systems, Ltd. ("Ivron") by
Gentner using the purchase method of accounting. The unaudited pro forma
condensed combined balance sheet as of September 30, 2001 gives effect to the
acquisition as if the acquisition had occurred on that date. The unaudited pro
forma condensed combined statement of operations for the quarter ended September
30, 2001 gives effect to the acquisition as if the acquisition had occurred on
July 1, 2001. The unaudited pro forma condensed combined statement of operations
presented for the quarter ended September 30, 2001 includes the historical
unaudited financial results of Gentner for its first quarter ended September 30,
2001 and Ivron for its third quarter ended September 30, 2001.
The unaudited pro forma condensed combined balance sheet as of June 30, 2001 and
the unaudited pro forma condensed combined statement of operations including the
historical audited financial results of Gentner for the year ended June 30, 2001
and unaudited financial results of Ivron for the fiscal year ended June 30,
2001, comprising the last six months of operations of Ivron for the year ended
December 31, 2000 and the first six months of operations of Ivron for the year
ended December 31, 2001 were included in the Original Filing. As discussed in
the Original Filing, Ivron's year end is December 31; therefore, Ivron's
financial results included in the pro forma information in such Original Filing
did not reflect Ivron's fiscal year ended December 31 as set forth in the
accompanying audited financial statements.
Unaudited pro forma combined financial information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
results of operations that would have actually been reported had the purchase
occurred at the beginning of the period presented, nor is it necessarily
indicative of future financial position or results of operations. These
unaudited pro forma combined financial statements are based on the respective
historical financial statements of Gentner and Ivron and do not incorporate, nor
do they assume, any benefits from cost savings or synergies of operations of the
combined company.
PF-1
Unaudited Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet
As of September30, 2001
(Historical)
Gentner Ivron Pro Forma Pro Forma
Communications Systems, Ltd. Adjustments Combined
(in `000s) (in `000s) (in `000s) (in `000s)
ASSETS
Current assets
Cash and cash equivalents $ 7,921 $ 460 $ (6,666) A $ 1,715
Accounts receivable, net 8,849 132 8,981
Note receivable - current portion 164 164
Inventory 3,741 651 4,392
Deferred taxes 247 247
Other current assets 693 693
-------- -------- --------- --------
Total current assets 21,615 1,243 (6,666) 16,192
Property and equipment, net 3,811 21 3,832
Goodwill and other intangibles, net 2,748 939 (939) B -
5,793 D 8,541
Note receivable - long-term portion 1,662 1,662
Deposits and other assets 73 73
-------- -------- --------- --------
Total assets $ 29,909 $ 2,203 $ (1,812) $ 30,300
======== ======== ========= ========
PF-2
Unaudited Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet
As of September30, 2001
(Historical)
Gentner Ivron Pro Forma Pro Forma
Communications Systems, Ltd. Adjustments Combined
(in `000s) (in `000s) (in `000s) (in `000s)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 583 $ 90 $ 673
Accrued expenses 2,352 301 2,653
Current portion of capital lease obligations 136 136
-------- -------- --------- --------
Total current liabilities 3,071 391 3,462
Capital lease obligations 31 31
Deferred tax liability 746 746
-------- -------- --------- --------
Total liabilities 3,848 391 4,239
Shareholders' equity
Common stock 9 5,367 $(5,367) C 9
Additional paid-in capital 9,110 5,278 (5,278) C 9,110
Retained earnings (accumulated deficit) 16,942 (8,833) 8,833 C 16,942
-------- -------- --------- --------
Total shareholders' equity 26,061 1,812 (1,812) C 26,061
-------- -------- --------- --------
Total liabilities and shareholders' equity $ 29,909 $ 2,203 $ (1,812) $ 30,300
======== ======== ========= ========
See accompanying notes to unaudited pro forma condensed combined financial
statements
PF-3
Unaudited Pro Forma Condensed Combined Statement of Operations
For the quarter ended September 30, 2001
(Historical)
Gentner Ivron Pro Forma Pro Forma
Communications Systems, Ltd. Adjustments Combined
(in `000s) (in `000s) (in `000s) (in `000s)
Net sales $ 11,220 $ 47 $ 11,267
Cost of goods sold 4,582 343 4,925
-------- -------- --------- --------
Gross profit 6,638 (296) 6,342
Operating expenses
Marketing and selling 2,469 304 2,773
General and administrative 1,280 695 1,975
Research and product development 752 116 868
-------- -------- --------- --------
Total operating expenses 4,501 1,115 5,616
Operating income (loss) 2,137 (1,411) 726
Other income (expense)
Interest income 108 2 110
Interest expense (5) (128) (133)
Other, net 42 42
-------- -------- --------- --------
Total other income (expense) 145 (126) 19
-------- -------- --------- --------
Income (loss) before income taxes 2,282 (1,537) 745
Provision for income taxes (870) (870)
-------- -------- --------- --------
Net income (loss) $ 1,412 $ (1,537) $ (125)
======== ======== ========= ========
Basic earnings per common share 0.16 (0.01)
Diluted earnings per common share 0.16 (0.01)
Weighted average shares outstanding:
Basic 8,608,479 8,608,479
Diluted 9,060,312 9,060,312
See accompanying notes to unaudited pro forma condensed combined financial
statement
PF-4
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
NOTE 1.
On October 3, 2001, Gentner executed its share purchase agreement with
Ivron. Under the terms of the agreement, Gentner purchased the cash, accounts
receivable, fixed assets, inventory, certain other assets, and technological
infrastructure, including patents, of Ivron. Gentner also assumed the accounts
payable and accrued expenses. Gentner issued cash of $6,000,000 for all issued
and outstanding shares of Ivron, cash of $650,000 for all outstanding options to
purchase common shares of Ivron, and incurred acquisition costs of $16,000 in
the transaction. The following is a summary of the purchase price allocation (in
thousands):
Cash $ 460
Accounts receivable 132
Fixed assets 21
Inventory 651
Goodwill and other intangible assets 5,793
Accounts payable (90)
Accrued expenses (301)
-----
Total $6,666
NOTE 2.
The unaudited pro forma condensed combined balance sheet includes the
adjustments necessary to give effect to the Ivron purchase as if it had occurred
at September 30, 2001 as noted above. The unaudited pro forma condensed combined
statement of operations includes the adjustments necessary to give effect to the
Ivron purchase as if it had occurred on July 1, 2001, and includes Ivron
operations for its third quarter ended September 30, 2001.
Adjustments included in the pro forma condensed combined financial
statements are summarized as follows:
(A) Cash outlay for acquisition includes:
o $6,000,000 - Cash paid to purchase all of the issued and
outstanding shares of Ivron as specified in the share purchase
agreement.
o $650,000 - Cash consideration paid to cancel all outstanding
options to purchase shares of Ivron.
o $16,000 - Cash paid for costs associated with the acquisition.
(B) Elimination of goodwill and other intangibles that were not purchased
as part of the acquisition.
o $937,000 - Goodwill from the acquisition of the Mentec Picturecom
business purchased by Ivron on March 6, 1998.
o $2,000 - Intangibles consisting of software.
(C) Elimination of the equity of Ivron.
(D) Amount represents goodwill of $5,777,000 and capitalized acquisition
costs of approximately $16,000. (E)
(E) Acquired intangible assets, including goodwill. As required under
recently released FASB Statement No. 141 (FAS No. 141), Business
Combinations, Gentner is required to allocate a portion of the
purchase price to recognize goodwill and intangible assets apart from
goodwill. Gentner, in conjunction with its advisors, is evaluating the
PF-5
new criteria established in FAS No. 141 to properly determine the
value of each intangible asset that should be recognized apart from
goodwill. In addition, as required under recently released FASB
Statement No. 142 (FAS No. 142), Goodwill and Other Intangible Assets,
a portion of the acquired intangible assets may be subject to
amortization. Such potential amortization has not been reflected in
the accompanying pro forma condensed combined statements of
operations. If the amount reported is subsequently determined to be
materially incorrect, revised pro forma financial statements will be
issued.
PF-6